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On January 1, 2013, a rich citizen of the Town of Ristoni donates a painting valued at

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On January 1, 2013, a rich citizen of the Town of Ristoni donates a painting valued at $300,000 to be displayed to the public in a government building. Although this painting meets the three criteria to qualify as an artwork, town officials choose to record it as an asset. There are no eligibility requirements for the gift. The asset is judged to be inexhaustible so that depreciation will not be reported.

A. For the year ended December 31, 2013, what will be reported on government-wide financial statements in connection with this gift?

B. How does the answer to requirement (a) change if the government decides to depreciate this asset over a 10-year period using straight-line depreciation?

C. How does the answer to requirement (a) change if the government decides not to capitalize the asset?


Financial Statements
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A The following information will be reported for the year ended December 31 2013 on governme...View the full answer


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In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue

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